Master Exam

An investor holds a bond where the issuer is scheduled to repay the borrowed principal at intervals over a number of years. This investor is holding A) a serial bond. B) a series bond. C) a balloon bond. D) a term bond.

A

The Achieving a Better Life Experience (ABLE) Act of 2014 enabled the establishment of ABLE accounts for certain individuals. Which of the following statements regarding ABLE accounts is false? A) Contributions can be made by any person, including the account beneficiary. B) Income earned in an ABLE account is not taxed. C) Eligibility is limited to those where the onset of a significant disability occurred before the age of 26. D) Contributions to ABLE accounts are tax deductible.

B

You notice a new customer, Malcolm Wren, has a pattern of buying and selling stocks with holding periods of just a day or two. He seems unconcerned with losses. Additionally, between trades, he wires the money to and from a number of offshore accounts. After informing your supervisor, the most likely action for your company is to A) inform the customer about the irregular activity in the account. B) inform the SEC. C) file a SAR with FinCEN. D) file a CTR with FinCEN.

C

A member firm broker-dealer is found to be in violation of a Securities and Exchange Commission (SEC) federal regulation and could be subject to all of the following except A) jail sentences for directors and officers. B) monetary fines. C) limits on activities the firm may participate in. D) revocation of the firm's registration.

a

Which of the following interest rates is set by the FRB? A) Discount rate B) Prime rate C) Federal funds rate D) Broker call loan rate

a

Which of the following is a non financial consideration? A) Risk tolerance B) Income C) Debt service D) Last year's AGI

a

Which of the following offering types would be used for a deal that will be sold exclusively to residents of one state? A) A Rule 144 offering B) A Reg S offering C) A Rule 147 offering D) A Reg A offering

a

M1 is a measure of which of the following? A) Large time deposits B) Cash and funds in demand deposit accounts C) Liquid securities D) Consumer savings deposits

b

Which of the following is a common way to reduce nonsystematic risk? A) Concentration B) Diversification C) Inflation D) Stratification

b

A customer has expressed interest in exchange-traded funds (ETFs) and wishes to discuss them with you. You could tell the customer all of the following except A) selling short and trading on margin are available transactions with ETFs. B) a share of an ETF represents an entire portfolio, or a specific selection, of securities. C) ETFs have a NAV, calculated at the end of the trading day, that serves as the trading price until the next NAV is calculated. D) real-time quotes are available for ETFs.

c

ABC Corp stock is trading at BID 75.32, ask 75.35 5 x 12. What is the spread? A) $0.35 B) $0.30 C) $0.03 D) $3.00

c

If a customer wishes to open a cash account in his name only and allow a third party to make trading decisions but not withdraw cash and securities, he must instruct his broker-dealer to open A) a limited joint tenancy account. B) a cash account with limited power of attorney. C) a custodial account. D) a cash account with full power of attorney.

c

Janet Johnson, a registered representative and licensed insurance agent, meets in the home with a 50-year-old widower to discuss what to do with life insurance proceeds of his deceased spouse. The widower is apprehensive about liquidity. Johnson hands him a prospectus for a variable annuity and recommends the funds be conservatively invested in separate accounts within the annuity. Johnson takes time to carefully explain and illustrate a 6% gross return over a 20-year period and further explains that earnings will grow tax deferred. What did Johnson do wrong? A) Nothing. Johnson made a careful, individualized presentation of a securities product. B) The separate accounts should have been presented as mutual funds. C) Johnson recommended a variable annuity to an individual who is looking for liquidity. D) Johnson waited until the presentation to deliver the prospectus.

c

The regulatory element of a representative's continuing education will need to be completed within 120 days of certain anniversaries of their licensing. Which of the following is not an anniversary where a representative would be required to complete the regulatory element of their continuing education? A) 5th anniversary B) 11th anniversary C) 3rd anniversary D) 2nd anniversary

c

Which of the following reasons for separation would not require further disclosure on Form U5? A) Permitted to resign B) Other C) Deceased D) Discharged

c

Your customer, Leticia Ryan, loves to drive fast cars. She has been considering purchasing a very fast car from an Italian automaker. Recently, she read that changes in the dollar might impact what she will pay for the car. She asks you to help her understand and you explain to her that A) an increase in the value of the U.S. dollar versus the Eurodollar may increase what the car will cost her. B) a decrease in the value of the U.S. dollar versus the Eurodollar may decrease what the car will cost her. C) a decrease in the value of the U.S. dollar versus the Eurodollar may increase what the car will cost her. D) changes in the U.S. dollar versus the Eurodollar will have no effect on the price of her imported car.

c

Your customers, Frank and Gracia Chen, are considering investing in a private placement to add to their portfolio. They mention they are accredited investors. If accurate, they have a net worth of at least A) $5 million or had an annual income of at least $100,000 in each of the five most recent years. B) $1 million or had an annual income greater than $200,000 in each of the two most recent years. C) $1 million or had an annual income greater than $300,000 in each of the two most recent years. D) $1 million or had an annual income of at least $200,000 in the past year.

c

An existing shareholder receives 1,000 stock rights from the issuer, allowing the holder to do all of the following except A) hold the rights indefinitely for future use. B) exercise the rights to purchase more shares. C) allow the rights to expire unexercised or unsold. D) sell the rights and profit from any increased market value.

d

If the U.S economy were to enter a deflationary period, which of the following would likely occur? A) Employment would rise. B) Gold prices would increase. C) Fixed-income payments become more valuable. D) Interest rates would increase.

d

Numbers measuring the output of goods and services have been declining for just under two years. The economy would be characterized as A) expanding. B) being in an economic trough within the business cycle. C) being just under the recessionary measurement threshold. D) being in a depression.

d

Regular way settlement for the purchase of an equity option occurs A) the same business day as the trade date. B) one business day after the trade date. C) three business days after the trade date. D) two business days after the trade date.

d

Seacoast Securities, LLC must maintain a copy of its membership agreement for how many years? A) Three years B) Six years C) Four years D) Forever

d

What does the BID represent? A) The lowest amount some may buy the security for B) The highest amount that someone may buy the security for C) The highest amount that someone can sell the security D) The lowest amount that someone can sell the stock at

c??

**Your broker-dealer is a fully disclosed firm. This means that it A) acts as its own back office, performing all functions such as sending out customer statements. B) accepts customer funds to be held at the broker-dealer. C) holds customer securities at the broker-dealer. D) introduces its business to a clearing agent.

a

An investor who is an affiliate of XYZ Corporation holds shares of restricted XYZ stock. These shares have A) a six-month holding period and are subject to volume limits for as long as the investor is an affiliate. B) no holding period, nor are they subject to any volume limitations currently or in the future. C) no holding period but are subject to volume limits for as long as the investor is an affiliate. D) a 30-day holding period and are subject to volume limits for as long as the investor is an affiliate.

a

Automatic disqualification for an individual to be registered in the securities industry would not include A) being charged with a non-securities-related misdemeanor. B) being under an SEC order to be barred from associating with a broker-dealer. C) having been found to enter a misstatement in the application for membership. D) having been found as the cause of another associated person's suspension.

a

If the Midlands Pencil Corporation has issued several different debt securities, an investor would expect the lowest income stream from A) convertible debentures. B) subordinated debentures. C) speculative bonds. D) ordinary debentures.

a

In general, a corporation assumes the least risk when it obtains funds from the sale of A) debentures. B) preferred stock. C) secured bonds. D) zero coupons.

a

The gross domestic product (GDP) for a country is best defined as A) all of the goods and services produced within the nation. B) the difference between goods produced and services produced. C) all of the goods and services sold domestically. D) all of the goods and services exported to other countries for consumption.

a

A customer of a broker-dealer holding two penny stocks in her account, purchased on unsolicited trades, should expect to receive an account statement how frequently? A) Quarterly B) Monthly C) Only months when a penny stock transaction has occurred D) Annually

b

A customer submits a written complaint disputing monetary charges assessed against an account held at a member broker-dealer. Resolution of this complaint will take place by A) the Conduct Rules. B) the Code of Arbitration (COA). C) the Uniform Practice Code (UPC). D) the Code of Procedure (COP).

b

A married couple opens a new account as JTWROS. All of the following statements regarding this account are true except A) if certificates are requested, they must contain the names of both parties. B) in the event of death, the decedent's interest is distributed through the decedent's estate. C) orders may be given by either party. D) mail may be sent to either party with the permission of the other party.

b

A registered representative is required to participate in an annual training plan prepared by the broker-dealer, which takes into account—among other things—recent regulatory developments, the scope of the broker-dealer's business activities, and its supervisory needs to comply with FINRA's A) Uniform Practice Code. B) firm element requirement. C) arbitration rules. D) regulatory element requirement.

b

NuBuckle, Inc., is an established accessory maker that is listed on several major exchanges. If your client owns 200 shares of NuBuckle common shares, they have all of the following rights except A) a right to a dividend. B) a right to inspect the books. C) a right to vote for who will serve on the board. D) a right to transfer their shares as they see fit.

b

Which of the following mutual fund share classes has no back-end load, lower operating expenses, and low or no 12b-1 fees? A) Class A B) Class C C) Class B D) Class C upon conversion to Class B

b

Which of the following persons would be allowed to purchase shares of an initial public offering (IPO)? A) An attorney acting on behalf of the managing underwriter B) The grandparent of a member broker-dealer employee C) The father of a member broker-dealer employee D) Someone owning 15% of a member broker-dealer

b

An investor who commits a sizable portion of her portfolio to long-term AAA rated bonds would be exposing herself to A) purchasing-power risk. B) uncertainty about the ability of the issuer to make timely payments of interest and principal. C) less market risk than if the portfolio were invested in money market instruments. D) liquidity risk.

c

DRG Pharmaceuticals, Inc. common stock is currently trading at $52 a share. A put with a strike price of $50 a share would be described as which of the following? A) Having $2 of intrinsic value B) Trading in the money C) Having no intrinsic value D) Trading at the money

c

Defined benefit retirement plans offer which of the following features? A) Plan assets vest after 12 months. B) Employees get to select their investment mix. C) The employee's benefits and length of service requirements are explained in the plan disclosure documents. D) Retirement payments are tax free after age 59½.

c

If a 40-year-old customer earns $65,000 a year and his 38-year-old spouse earns $40,000 a year, how much may they contribute to an individual retirement account (IRA)? A) Only the higher wage earner may contribute to an IRA. B) They may contribute up to the maximum annual allowable dollar limit, split evenly between both accounts. C) They may each contribute 100% of earned income or the maximum annual allowable dollar limit, whichever is less. D) They may not contribute because their combined income is too high.

c

If a real estate investment trust (REIT) distributes 85% of its net investment income to shareholders, on how much of its net investment income must the trust pay taxes? A) 85% B) Only on that portion not taxable to the shareholders C) 15% D) 100%

c

Which of the following is considered a systematic risk? A) Default risk B) Financial risk C) Regulatory risk D) Purchasing power risk

d

*All of the following statements about a bond selling above par value are true except A) the nominal yield is lower than the current yield. B) the yield to maturity is lower than the nominal yield. C) the current yield is higher than the yield to maturity. D) the nominal yield always stays the same.

d

Representative Gary Willikers recently passed his licensing exams and was hired by Seacoast Securities, Inc., a broker-dealer member firm. He was recommended to the position by his Uncle George, who has worked for the firm for over a decade. Gary would like to send out a mail advertisement to help generate new customers. In order to do this, Gary will need approval from a principal of the firm, and the communication must be filed with A) FINRA at least 10 days before use. B) FINRA at least 30 days before use. C) the SEC within 10 days of use. D) FINRA within 10 days of use.

a

A breakpoint sale is defined as the sale of mutual fund shares in an amount A) just below the public offering price of the fund. B) just below the dollar amount at which the sales charge is reduced. C) at or above the dollar amount at which the sales charge is reduced. D) required as the minimum investment in a fund as specified by the SEC.

b

A corporate stock transaction occurs regular way on Monday, August 3. Ownership of the securities is recognized as changing hands between buyer and seller on A) Tuesday, August 4. B) Wednesday, August 5. C) Thursday, August 6. D) the trade date.

b

Regarding delivery for listed option contracts when exercised, which of the following is true? A) Equity and index options are settled in U.S. dollars. B) Currency and equity options are settled in the underlying security. C) Equity options are cash settled in U.S. dollars. D) Currency and index options are cash settled in U.S. dollars.

b

The residents of the city of Sandy Place, California, recently voted in favor of issuing a bond. The proceeds of the bond will be used to build a baseball stadium for the local minor league baseball team. Though the bond's costs are expected to be covered by the ticket revenue from the stadium, the bond contains a provision that requires the city to pay the bond's interest payments as well as pay the principal at maturity if the ticket sales are insufficient. This bond is an example of A) a mortgage bond. B) a revenue municipal bond. C) a general obligation municipal bond. D) a senior debenture.

b

An investor holds a 4% corporate bond with a yield to maturity of 2.75%. How much will be received in interest on each of the scheduled interest payment dates? A) $400.00 B) $20.00 C) $27.50 D) $40.00

c

An investor sold MJS stock, a stock not currently owned in her portfolio. This is A) a limited-risk position. B) a closing transaction. C) a bearish position. D) a long position.

c

Under the Investment Company Act of 1940, an investment company may take all of the following forms except A) a unit investment trust. B) an open-end investment company. C) a limited partnership with partners as passive investors. D) a closed-end investment company.

c

Variable annuities include which of the following attributes? A) Tax-free growth B) Intraday liquidity C) Guaranteed life income D) Unlimited pretax contributions

c

When a security position is liquidated for a gain, cost basis A) represents a return of capital invested (principal). B) is taxed as a capital gain. C) is taxed as ordinary income. D) represents the difference between capital invested and sales proceeds.

c

Your customer is very excited about Cavendish Carousel Corp., a maker of amusement park rides. He believes that the company is well poised to grow in the next several years. His attitude is described as A) bearish. B) brutish. C) bullish. D) bovine.

c

Your customer purchased 100 shares of Cuesta Verde Homes at $15 per share in a margin account. How much must the customer deposit by settlement day to pay for the trade? A) $2,500 B) $1,500 C) $2,000 D) $750

c

Which of the following risks is not a nonsystematic risk? A) Interest rate risk B) Default risk C) Legislative risk D) Business risk

d

Local government investment pools (LGIPs) are established by A) the federal government to provide municipalities a place to invest funds long term. B) states to provide municipalities a place to invest funds long term. C) states to provide municipalities a place to invest funds short term. D) local municipalities to allow states a place to invest funds short term

c

Your customer, Maya Jenyer, is 27 years old and in the 20% federal income tax bracket. She is interested in opening a Roth IRA as a supplement to her retirement savings. Her intention is to place the entirety of her contribution into the Windmill Growth Fund, which offers a choice of share classes. Which share class would likely be best for this customer? A) B shares B) I shares C) C shares D) A shares

d

Max Larsson purchased stock of a company in the business of manufacturing yachts. Two years ago, his securities had lost most of their value immediately following a newly enacted luxury tax on purchases of more than $300,000. The investment most likely suffered a loss due to A) legislative risk. B) business risk. C) interest rate risk. D) political risk.

a

The maximum amount of securities that may be sold by an insider within a three-month period under Rule 144 is A) 1% of the shares outstanding or the average weekly volume of trading in the previous four weeks, whichever is greater. B) 1% of the shares outstanding or the average weekly volume of trading in the previous eight weeks, whichever is the lesser. C) 5% of the shares outstanding. D) the average weekly volume of the previous eight weeks.

a

A risk within a business that represents a specific threat to that company is an example of which of the following? A) Market risk B) Nonsystematic risk C) Systematic risk D) Purchasing power risk

b

Which of the following may be considered suspicious? A) Transactions that alone, or in the aggregate, involve at least $2,000 B) A customer unconcerned about losses C) Moving large sums of money between accounts with the same last names D) A client expressing undue concern about substantial commissions being charged to the account

b

1 Your customer is interested in Sierra Verde Coffee Company stock, which is currently trading at $22 a share. She would like to buy 400 shares, but not for more than $20 a share. Which order best meets her request? A) Buy stop at $20 B) Sell limit at $20 C) Buy limit at $20 D) Sell stop at $20

c

A registered representative is permitted to work from a home residence conducting normal business activities. Regarding the arrangement, all of the following statements are true except A) taking customer orders for the purchase and sale of securities would be permitted at this location. B) the location would be subject to a premise visit and review by a principal of the firm. C) the address and telephone number of this location may not be advertised. D) approval of the member firm's self-regulatory organization (SRO) is required.

c

Anna, a manager for Great Plains Securities, resigns her position and surrenders her principal registrations in order to return to being a registered representative with no management duties. She will continue at the same firm and in the same office. How many days does the firm have to file Form U5? A) 60 days B) 10 days C) 30 days D) 45 days

c

Changes in the overall economy that negatively impact securities values are called A) unsystematic risk. B) nonsystematic risk. C) systematic risk. D) universal risk.

c

For a new customer opening an account, assuming there are no physical or mental impairments, what age would trigger the registered representative to request that the name of a trusted contact person for the account be given? A) Age 18 B) Age 55 C) Age 65 D) Age 21

c

Regarding a member firm's fingerprint records for employees, which of the following statements is not true? A) Fingerprint records are required for all those physically handling cash or securities, whether the position is deemed clerical or not. B) Fingerprint records are required for all associated persons involved in the sales of securities. C) Fingerprint records must be submitted to the Securities and Exchange Commission for processing. D) Fingerprint records need not be kept for employees deemed to be performing clerical functions only.

c

Regarding stock rights and stock warrants, which of the following is true? A) Warrants have a short-term subscription length (expiry). B) Rights are exercised to purchase shares at a premium above the security's price when issued. C) Warrants are sometimes bundled with other securities. D) Rights cannot be sold in the open market and are only exercised once received.

c

Regarding the third and fourth markets, which of the following is true? A) The fourth market is for the trading of OTC issues only. B) The third market can be accessed through electronic communication networks (ECNs) only. C) The fourth market is for institutional investors and eliminates the need for brokers to act as intermediaries. D) The third market allows institutions to trade directly with each other.

c

Registered Representative Jim Terry recently purchased a list of potential investors and plans to begin to cold call them soon. In addition to the other rules of the TCPA of 1991, Jim needs to consult A) the national and the state's do-not-call registries and not call any number that appears on both lists. B) the national and the state's do-not-call registries and not call any number that appears on either list. C) the national and the firm's do-not-call registries and not call any number that appears on either list. D) the national and the firm's do-not-call registries and not call any number that appears on both lists.

c

Which of the following companies is in a cyclical industry? A) A gold mining company B) A petroleum refiner C) A heavy equipment maker D) A beverage bottler

c

Which of the following is not information required for Form U4? A) Felony conviction B) Home address C) Education D) Work history

c

Which of the following may not be disclosed to a potential buyer while a security is in registration? A) The issue is expected to be priced early June. B) The issue is being offered through ABC Investment Bank. C) There will be a road show in NYC in May. D) A brokerage report shows the security is properly valued.

c

Which of the following orders wouldnot be a discretionary trade? A) Spend an appropriate amount investing in Seabird Airline stock B) Spend up to $10,000 buying Seabird Airline stock C) Liquidate the weakest position among the three airline stocks in the portfolio D) Spend up to $10,000 buying a great airline stock

c

Which of the following statements describing Section 529 plans is true? A) The maximum contribution varies from state to state. B) The fees associated with them are similar from state to state. C) Most state college savings plans require either the owner or the beneficiary of the plan to be a state resident. D) They can only be opened for children under age 18.

c

*An investor has the following position in MES stock: 100 shares at $30. After a 2:1 stock split, this investor will have A) 100 shares at $15 per share. B) 100 shares at $60 per share. C) 200 shares at $15 per share. D) 200 shares at $30 per share.

d

2. In a cash account, an investor must pay for a purchase by A) depositing at least 50% of the purchase price by settlement. B) having at least 50% of the trade in the account. C) having the cash available in the account. D) depositing the entire amount of the trade by the settlement day.

d

All of the following are U.S. government agency debt securities except A) Federal National Mortgage Association securities. B) Treasury notes. C) Government National Mortgage Association securities. D) Farm Credit Administration securities.

d

Juan owns 1,000 shares of the big box retailer Buystuff, Inc. (Ticker: BSTF). He has owned the shares for 10 years and they have appreciated nicely. If Juan desires to generate income from the BSTF position, he could do which of the following? A) Buy 10 BSTF calls B) Buy 10 BSTF puts C) Sell 10 BSTF calls D) Sell 10 BSTF puts

d

Registered Representative Jan Wu terminated her employment with her broker-dealer 18 months ago in order to return to school and complete a graduate degree in finance. She has completed her education and applies for a position with a new broker-dealer firm. She will A) be required to retake her qualifying exams because of the number of changes to her U-4. B) not be required to retake her exams because she was a full-time student, and there is no time limit for returning so long as the representative was a full-time student. C) be required to retake her qualifying exams because more than two years have passed since she sat for the exams. D) not be required to retake her qualifying exams.

d

The federal act that requires registration with the Securities and Exchange Commission (SEC) as a face-amount certificate company, unit investment trust company, or management company is A) the Investment Company Act of 1940. B) the Trust Indenture Act of 1939. C) the Securities Exchange Act of 1934. D) the Securities Act of 1933.

d

Which of the following is correct concerning an uncovered call writer? A) Both gains and losses are limited to the premium received from the sale of the option. B) The premium is the maximum loss and the gain potential is unlimited. C) Both gains and losses are unlimited since the position is uncovered. D) The premium is the maximum gain and the loss potential is unlimited.

d

Your customer purchased MAS stock in September and sold it in the next year in February for a profit. This profit will be reported for tax purposes as A) short-term ordinary income. B) a long-term capital gain. C) long-term ordinary income. D) a short-term capital gain.

d